Is There a Replication Crisis in Finance?
Authors:
- Theis Ingerslev JensenTJTheis Ingerslev Jensen
- Bryan KellyBKBryan Kelly
- Lasse Heje PedersenLPLasse Heje Pedersen
Top Cited Papers
Open Access
- 9 June 2023
- journal article
- research article
- Published by Wiley in The Journal of Finance
- Vol. 78 (5) , 2465-2518
Abstract
Several papers argue that financial economics faces a replication crisis because the majority of studies cannot be replicated or are the result of multiple testing of too many factors. We develop and estimate a Bayesian model of factor replication that leads to different conclusions. The majority of asset pricing factors (i) can be replicated; (ii) can be clustered into 13 themes, the majority of which are significant parts of the tangency portfolio; (iii) work out‐of‐sample in a new large data set covering 93 countries; and (iv) have evidence that is strengthened (not weakened) by the large number of observed factors.Keywords
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